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When Should You Dispute Credit Report?

our credit report tells the world a lot about you. What if it's saying something it shouldn't? Can you dispute your credit report?

The short answer is "yes." But before you raise that red flag, you should know about the types of errors that typically occur, and which ones are more harmful than others.

As more Americans learn how to pull their credit histories, many are finding their reports aren't giving a clear picture to potential creditors. Names are sometimes misspelled, and addresses are outdated. Even more discomforting, some people find information they don't recognize.

Some of these inaccuracies are harmless, but others could hurt your chances at getting a loan. This is why experts urge people to keep track of their credit histories and to watch for anything that looks out of whack.

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Here are six common errors that turn up on credit reports, and what you can do if you find one.

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Wrong Information

What if your credit report includes accounts that aren't yours? Or it says you lived somewhere you didn't? Or maybe it puts a different middle initial in your name?

Does this mean someone stole your identity? Not necessarily.

In many cases, the credit reporting agency has included data from another person with a similar name, says Bill Bartmann, co-founder of CFS II, a Tulsa, Okla., debt-collection company.

"In my case, I have had another Bill Bartmann's information appended erroneously to my report," he says. "It's not malicious. It's human error."

Credit reports also sometimes include out-of-date details, such as an old address or employer, says Linda Sherry, spokeswoman for Consumer Action.

Some of those details are relatively benign, but "I would dispute anything that's inaccurate," Sherry says.

The quickest way to clear your report of errors is to first communicate with the agency that reported the error. Then follow up in writing, Bartmann says.

It also makes sense to notify other credit bureaus because they often share information.

Phantom Foreclosures

The credit reporting industry hasn't caught up to the new ways banks allow people to deal with overbearing mortgages, Bartmann says.

It still lumps together short sales, strategic defaults and loan modifications as "foreclosures" on credit reports.

That's a problem. A foreclosure is one of the most damaging items to have on your report. You may not have walked away from your home loan, yet your credit report is saying you did.

Anyone who has had a loan modification switched to a "foreclosure" can fix the problem by working with the bank that made the loan. Bartmann says the consumer should ask the bank to corroborate that it wasn't a foreclosure and help explain that to the credit reporting agency.

"It's hard," he says. "Getting them to answer the phone call, dig up old records and prove something is not easy. It does require some skill and persuasion."

You Got Dumped?

You may have canceled one of your credit cards, but your report says the opposite: "closed by grantor."

"When this one shows up, the score drops like a rock," Bartmann says. Your credit score is especially sensitive to who initiated the breakup.

"It's more important than it was in high school," Bartmann says.

The term "closed by grantor," implies that you didn't quite meet the company's requirements or expectations. That could affect how other lenders see you.

The best fix: Call your former issuer and get them to look at their records. Then check your credit report the following month to see that it's correct.

When it comes to fixing mistakes that show up on your credit report, "never assume the other guy is going to do (what) they said they were doing to do," Bartmann says.

Incorrect Account Balances

You scope out your credit report and notice that the balance on your credit card is higher than it should be.

Does it mean there's a problem? Not necessarily.

Credit card "data is transmitted from the lenders to the credit bureaus once a month," says Norm Magnuson, a spokesman for the Consumer Data Industry Association, a trade association for credit reporting companies.

"By the time the consumer looks at it, it could be a few weeks old," he says.

That's not a big deal, unless you're trying to secure a mortgage or refinance a loan and need that balance to drop.

If you want to change the balance listed on your credit report, there is something you can do. Potential lenders can get an updated balance through the credit bureau. But you may get charged for that service, Magnuson says.

Strangers Viewing Your Credit?

Your credit report will reveal who has been looking at it. And it can be a shock to find out that a company you're not familiar with viewed your history.

If you see a strange company on your credit history, it's because of one of two reasons. Either a credit issuer has pulled your report to try and interest you in its services. Or you've applied for credit that's actually being issued by a third-party company, Magnuson says.

Many "credit cards are serviced by third-party servicers," Magnuson says. If you applied at a local retailer for its store card, the issuing company's name could make it on your credit report.

You shouldn't worry about simple name changes such as this. And if a credit issuer pulls your report for marketing purposes, that won't affect your credit score.

Old Accounts

Your credit history shows a repaid car loan from 10 years ago. Why is that still there?

Only the bad marks (such as delinquencies and charge-offs) are required to disappear after seven years, Sherry says. Old accounts with a positive record can stay on indefinitely, and they're actually good for the consumer, she says.

Two things that should not appear: debts discharged in bankruptcy and bad debts that are at least seven years old.

With bankruptcy, you'll have paperwork showing the debt was discharged, and you can forward that information to both the creditor and the credit reporting bureaus.

The rule on old debt: Once the original debt has been on your report for seven years, it is supposed to disappear from your credit history. If you see a debt older than seven years on your report, you can notify the credit bureaus to get it taken off.

And you may have to do that several times before it comes off permanently, Sherry says. "It's an imperfect science."